• Choose a category
• All
• Classic-Fiction

By Root 1339 0

gold money in the circulation of these countries would have necessitated the conveyance of enormous quantities of gold to them, which would not have been practicable without serious convulsion of the European money market and would have meant great sacrifice. The governments of these countries, however, had to endeavor at all costs on the one hand not to raise the value of gold (so as not to disturb the European markets), and on the other hand not to reduce the value of silver any more than was necessary. The English government in India did not dare to undertake anything which might have had an unfavorable influence on the London money market; but, having regard to India's Asiatic competitors, which presumably would remain on the silver standard, neither did it dare to take any steps which would expedite the fall in the price of silver and consequently weaken for a time, even if only in appearance, the ability of India to compete with China, Japan, the Straits Settlements, and the other silver countries. It therefore had the task of conducting India's transition to the gold standard without buying gold in considerable quantities or selling silver.

The problem was not insoluble. Within limits, the circumstances were similar to those of the bimetallic countries which had discontinued the free coinage of silver at the end of the seventies. And besides, careful scientific consideration of the problem showed that it was possible to create a gold standard without a gold currency; that it was enough to discontinue the free coinage of silver and to announce its convertibility into gold at a specific rate, making this effective by establishing a suitable conversion fund, in order to give the country a gold standard which would differ from that of England only in the lower level of the stock of gold. It was only necessary to go back to the writings of Ricardo in order to find the plan for such a currency system already worked out in detail. Lindsay[8] and Probyn[9] followed this path and, building upon Ricardo, worked out plans for this kind of currency regulation. Both wanted to close the mints to silver and to make the rupee convertible into gold at a fixed ratio. For the future, only the rupee was to be legal tender. The two proposals differed on some minor points, of which the most important was that while Probyn held it necessary that the rupee should be convertible into gold in India itself, Lindsay was of the opinion that it would suffice if the conversion were to be in London from a gold reserve to be established there. Both proposals were rejected, by the Indian government and by the commissions appointed to inquire into the Indian monetary system. The opinion was expressed that a normal gold standard necessitates an actual gold currency, and that the lack of such a currency would awaken mistrust. [10]

The report of the commission of 1898 was signed by the most eminent experts of the day; its comments on the recommendations of Probyn and Lindsay were supported on the decisive point by the expert opinions of the biggest bankers in the British Empire. The course of events vindicated the theorists, however, not the statesmen and great financiers who had regarded them with amused commiseration. What was ultimately done in India corresponded roughly and on the whole to the recommendations of Probyn and Lindsay, even if there were variations in detail. And the monetary systems of other countries that had previously been on a silver standard were organized in a precisely similar manner The present currency system of India, of the Straits Settlements, of the Philippines, and of the other Asiatic countries which have followed their example, is superficially characterized by the fact that in domestic trade, payments in money, that is, in gold, do not occur at all or at least are far rarer than in the gold-standard countries of Europe and America, and even in these the actual circulation of gold is only quite small in proportion to the total of all the payments made with the help of money. Under the system in India, payments are made,